Butterflies on Daily Contracts

#1

Darrel,

Curious what your thoughts are on doing butterflies (70/30 preferably but no more than 75/25) on daily (more accurately weekly contracts five days out) contracts in either currencies or indices. At the beginning of the week I did 7 butterfly trades this way. I have been stopped out of four sides of one trade thus far with 15-17 hours to go before expiration. I bought one contract on each side. If I were to take profit now on all remaining positions I would have just about a $100 profit on all trades. All remaining open trades are still almost dead center of both strikes. I understand that is in no way indicative of how things will always work and that I don’t even know if these trades will pan out in the end. Obviously I have a long way to go before knowing if this is a viable strategy.

This strategy obviously provides much wider strikes and should provide greater odds of winning either by wining both sides or by winning one side at an overall profit on each trade. With strikes that are far apart it would seem to be easier to close out of one side (if necessary) with less of a chance of the strike on the other side being touched.

I believe you have stated in previous posts/videos that you never or rarely trade the daily/weekly contracts. However from an odds standpoint (even with as much time as there is to expiration) it would seem to make sense.

Thanks very much for your feedback and for all you do.

Jeff

#2

Thanks for posting Jeff, I’m curious about the same thing. Looking forward to Darrell’s response.

#3

Said bought one contract on both sides

Assuming you mean bought one below and sold one above.

7 contracts $100 is not a lot of profit that is about $15 a butterfly (not horrible on the thought of pushing up about $140 in margin) but 1 losing trade could obviously hurt quite a bit if your taking $15 profits.

" I have been stopped out of four sides of one trade thus far with 15-17 hours to go before expiration." - I have no idea what this means “four sides of one trade”?? Do you mean stopped out of 4 of your 7 and you did 7 on 7 different markets sorry not very clear?

If you where stopped out why where you stopped out how where you stopped out what stop out did you use.

Wider strikes with more time until expiration do not provide a greater probability of winning than narrower strikes with less time to expiration.

Narrow strikes are narrow lowers probability but less time for the market to move which increases probability

Wider strikes are wide increase probability - but more time till expiration - lowers probability as more time to move

The pricing considers the probability based on implied volatility of events and expected movement between the current time and expiration and that is built into the pricing.

I do daily contracts often though mainly on spreads Weekly contracts i see little benefit You pick more time on a trade to make more money. Binaries don’t make more or less no matter how long there is to expiration This is a misconception that wider strikes will make more so daily and weekly are better but is not considering the reality of expected movement is priced in and the same profit or loss is possible in 2 hour daily or weekly.

Nothing wrong with doing dailies and weeklies just going to be slower for no good reason. I can put a trade on just as fast on a intraday as i can on a daily or weekly. I wont spent all day week looking at it. And the result will be there.

Response well i can make money faster and i could lose it faster on intraday no just do 1 a week 1 a day etc… You don’t have to do them every hour if this is your argument your just waiting longer for premium to decay and allowing for more events and news stories to come out and impact the probability of your trade being profitable is diminishing.

what is your take profit?

how are you picking ranges for butterflies - price of the binary alone is not wise - check out our expected ranges indicator and adjust it to where it starts and stops on your entry time and chosen expiration to tell you what to expect for movement to allow you to accurately pick the correct strikes then see if the binary price justifies the trade or not

I did a butterfly on the air today that was a mere 20 pips wide on eur/usd live on the radio open to close in 1 show make $165 on just 1 trade 5 contracts and done. and I closed it before expiration… versus watiing a day or a week to do the same trade

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#4

Thanks so much for your response Darrel.

Yes I did 7 butterfly trades one above and below for each. In the end I closed one side on 5 of the 7 trades due to the strike price almost being reached. Total profit was 141.50 on the seven butterfly trades. 9 out of the 14 sides were profitable. Including the losing sides only $15.72 profit per side. Admittedly a long time to wait for small amount of profit.

These trades were easy to watch in the beginning since the strikes were so far apart. I eventually used the stop trigger to stop me out once I was within five ticks of the strike on the sides of each trade that were in danger of losing. Three of the sides that were stopped out would have been profitable had I held on to them.

The take profit depended upon when how much was lost on the other side of each trade. During my first post all the sides that were winning were so far in profit that I just let them expire. Otherwise take profit would be within 4 or 5 dollars of the max

I was actually also doing some intraday trades as well. I had some good success with those as well. I am a night trader starting with a small live account balance. I am trying to trade the demo like I would be trading my live account one contract at a time to start. I would much rather be doing multiple contracts. I hope to be able to do that soon. Don’t want to put all my eggs in one basket. I have grown my live account over 20% over the starting balance in the last few weeks.

I am currently using the MVP on all charts along with the expected range indicator. This helped on the intraday trades but was less helpful on the daily and weekly contracts due to the time involved. However the deviations were helpful throughout. This daily/weekly strategy certainly would not be a main strategy but hopefully one of many should it turn out to be viable.

Thanks very much for the detailed feedback. I appreciate the time you took to reply and the time you take to reply to all posts. It is clear that you invest a lot of time here and that you want all of us to be successful.

Jeff